VAT 5% on First Property

The Value Added Tax (VAT) on the purchase of primary residences

The Value Added Tax (VAT) on the purchase or construction of primary residences has been approved by the Plenary of the House. This significant development, with 42 votes in favor and one abstention, marks a positive step towards enhancing affordability and accessibility in the real estate sector.
Under the new legislation, a reduced VAT rate of 5% will be applied to the first 130 square meters (sqm) of residential or apartment properties, valued up to €350,000. This favorable rate aims to support individuals and families in their pursuit of homeownership, providing them with a more affordable path towards acquiring their dream residence.

Furthermore, the introduction of a progressive VAT scale brings additional benefits. For properties and apartments ranging from 131 sqm to 190 sqm, with a value up to €475,000, a 19% VAT rate will be imposed. This ensures that a fair and proportionate tax structure is in place, accommodating varying property sizes and values.
It is important to note that properties larger than 190 sqm and exceeding €475,000 in value will also be subject to a 19% VAT rate from the very first square meter. This provision ensures that all segments of the market are included, while still maintaining a balance between fiscal considerations and the overall objective of boosting the real estate sector.

To facilitate a smooth transition, the new VAT scheme will commence from November 1st, in compliance with the EU’s requirement of a reduced VAT rate for the initial 110 sqm. This progressive timeline allows individuals and developers to plan accordingly and take advantage of the favorable VAT rates.
In recognition of ongoing urban planning efforts, the new regulation includes provisions to exempt properties that have obtained urban planning permission or have submitted an application within four months from the law’s entry into force. This allows for flexibility and acknowledges the importance of aligning with existing administrative processes.

We want to highlight the insurance clause embedded within the legislation. Upon securing urban planning permission, individuals or developers must submit a duly completed declaration to the Tax Commissioner within three years from the commencement of the proposed law. This step ensures compliance with the reduced VAT rate for the purchase or construction of a residential property.
At ATCA Co. Ltd, we understand the impact that regulatory changes can have on individuals, businesses, and the broader economy. Our team of experienced professionals is here to provide comprehensive guidance and support, ensuring that you navigate the new VAT framework seamlessly and maximize the benefits available to you.

For further information or assistance with any accounting matters related to the new VAT framework, please reach out to our dedicated team. We are committed to helping you make informed decisions and achieve your financial goals.